BHP Billiton's U.S. shale business will grow liquids production to 200,000 b/d in fiscal 2017, based on planned annual investment of $4 billion, while the company's total onshore U.S. production reaches 500,000 boe/d over the same period, Tim Cutt, president of the BHP's petroleum and potash business said in Houston Tuesday.
"In this scenario, onshore U.S. is expected to be self-funding in the 2016 financial year before generating almost $3 billion of free cash flow in the 2020 financial year," he said. "As a result, onshore U.S. is well positioned to become another major cash flow-generator for BHP Billiton."
During an investor presentation, Cutt said BHP's petroleum business is increasingly becoming focused on Australia and the United States. "Although our resource base could support substantially higher rates of investment, we will focus on value over volume," he said. "Our production guidance for the 2014 financial year remains unchanged at 250 million boe [net to BHP]."
Cutt said there "is a significant productivity opportunity" in the U.S. shale business as technology and efficiency gains continue to accrue over the life of the various shale plays. In the United States BHP is active in the Eagle Ford Shale and Permian Basin in Texas, where it is currently pursuing oil and liquids development. Acreage in the Haynesville and Fayetteville shales is mostly held by production and activities there will be dialed up when natural gas prices improve, Cutt said. This is the company's "value-maximizing strategy," he said.
"The key message here is that we have a lot of flexibility in our shale business, and we have leveraged that flexibility with a clear focus on value."
Last year the company took a $2.84 billion pre-tax charge against the value of dry gas assets in the Fayetteville Shale due to low gas prices (see Shale Daily, Aug. 7, 2012). BHP bought the Fayetteville assets from Chesapeake Energy Corp. in February 2011 for $4.75 billion in cash (see Shale Daily, Feb. 23, 2011). It later bought out Eagle Ford pioneer Petrohawk Energy Corp. for $12.1 billion (see Shale Daily, July 18, 2011).
BHP will continue to assess and grow its liquids acreage, Cutt said. "Our evaluation program in the Permian has successfully identified a focus area where we are actively pursuing a 100,000 boe/d development," he said. "The investment associated with our overall evaluation of the Permian Basin, which has identified this focus area, will lead to a depreciation charge of approximately $600 million in the Permian in the 2014 financial year, which reflects the early stage of development.
"Our productivity agenda is also a major focus and some of the largest opportunities can be found right here in the shale industry. This is a business that looks a lot like a manufacturing operation where repetition, efficiency and advancements in technology characterize best practice."